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Monday, March 22, 2010

No Market Crash Yet

I came in this morning and the stock market is actually up after they passed Obamacare last night. I was expecting a massive selloff. Healthcare stocks are up!

The past 18 months have thrown a monkey wrench in my former belief that I've held all my life about the stock market being basically rational. I always knew there was an emotional twist. But the path the stock market has followed is almost purely emotional and irrational. I believe success in investing requires the ability to forecast the likely moods of the herd. Thinking that the stock market will not grow by 50% in the same year that millions more people are unemployed, would be rational. Despite the layoffs and general malaise the Dow keeps going up. Why? There is really little connection between main street and wall street. You may be able to make money from that if you can reasonably understand the likely mentality of herds. Maybe tracking sentiment somehow. I haven't figured it out yet.

The Dow Jones is at about 10,800 today. It keeps going up. I had thought the Obamacare debacle would trigger a selloff. Maybe it will happen later in the week but not yet. The Dow is greatly over-valued. I still expect the Dow to plummet to about 8500 by the end of this year. We'll see what happens.